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Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
April 6, 2009
From Elliot
Goldberg, Registered Investment Advisor, Goldata
Financial
Last week, this market punter became a
full-fledged member of the bullish camp. Recall from last week’s
missive (http://www.goldata.com/commentary-2009-03-30.htm) that after three
weeks of rallying to SPY81 off of a death-defying plunge earlier in the year,
a pullback to SPY75 was looked to as an entry point. The fundamental news
continued putrid as Monday brought news from the weekend talk shows that
Treasury Secretary Geithner felt the banks may (will) need more capital.
Tuesday brought a report on home prices that their slide continues down with
no sign of turn. Wednesday morning’s ADP unemployment report of 742,000
before the opening bell knocked the futures down yet each of these bouts of
selling was less pronounced, and was followed by a quick retracement. More
importantly, the obvious rotation, late in the week, out of more defensive
issues such as gold and health care to economically sensitive issues such as
steel and oil and the continued strength in tech and retail signaled that Mr.
Market sees clearer skies down the road. We never did get down to SPY75 and
this case of buyer’s frustration is also a bullish indicator as a
bull-market doesn’t let one in at one’s pullback price. The bank’s
long-awaited mark-to-market “adjustment” was blessed by FASB on
Thursday and there was hope here that “sell on news” would be the
catalyst for the above-mentioned pull-back, but only the financials sold off.
What does the market see that we don’t? Perhaps pull-through demand
from China as a result of their recent stimulus efforts or a realization that
our efforts will stem the tide. We will only know in hindsight just as we are
now living with this year’s tsunami that Mr. Market saw coming 6-12
months ago and sold off hard on its expected arrival. One item to watch is
the VIX, the market’s volatility measure, which would have been
expected to retreat significantly over the last few weeks, but has not. The
take here is that we’ll continue to have above average volatility with
sell-offs quick and deep, the mirror image of the rallies we have seen over
the last 18 months. As a result, opening up stops will work to our
disadvantage and will have to wait. Each day brings more stocks onto the buy
list, as 200-day moving averages will continue to recede so I expect cash to
be in short supply in portfolios going forward, short of a change in market
direction. For those who are concerned we have come “too far, too
fast”, a look at year to date results show the S&P 500 still down
6.73% for 2009. The level of non-believing and waiting for pull-backs is
expected and is a bullish indicator as this money tends to enter at higher
levels supporting the rally, only to be left holding the bag.
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